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Management’s Discussion and Analysis
Jarden Corporation Annual Report 2010
In January 2010, the Company entered into foreign currency contracts to purchase C
=125 million as a hedge against the Euro
purchase price of the Acquisition. These foreign currency contracts, which matured on April 1, 2010, were not designated as effective
hedges for accounting purposes and an $8.5 million fair market value loss was recognized and included in the results of operations.
Commodity Contracts
The Company enters into commodity-based derivatives in order to mitigate the impact that the rising price of these commodities
has on the cost of certain of the Company’s raw materials. These commodity-based derivatives provide the Company with maximum
cost certainty, and in certain instances allow the Company to benefit should the cost of the commodity fall below certain dollar
levels. At December 31, 2010, the Company had outstanding $6.6 million notional amount of commodity-based derivatives that are
not designated as effective hedges for accounting purposes and have maturity dates through June 2011. Fair market value gains or
losses are included in the results of operations.
The following table presents the fair value of derivative financial instruments as of December 31, 2010:
Significant Accounting Policies and Critical Estimates
The Company’s financial statements are prepared in accordance with GAAP, which require us to make certain judgments, estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. The following list of critical
accounting policies is not intended to be a comprehensive list of all its accounting policies. The Company’s significant accounting
policies are more fully described in Note 1—Business and Significant Accounting Policies. The following represents a summary
of the Company’s critical accounting policies, defined as those policies that the Company believes are the most important to the
portrayal of its financial condition and results of operations, and/or require management’s significant judgments and/or estimates.
In many cases, the accounting treatment for a particular transaction is specifically directed by GAAP with no need for management’s
judgment in their application.
Revenue Recognition and Allowance for Product Returns
The Company recognizes revenues at the time of product shipment or delivery, depending upon when title passes, to unaffiliated
customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and
collection is reasonably assured. Revenue is recognized as the net amount estimated to be received after deducting estimated
amounts for product returns, discounts and allowances. The Company estimates future product returns, discounts and allowances
based upon historical return rates and its reasonable judgment.
Allowance for Accounts Receivable
The Company maintains an allowance for doubtful accounts for estimated losses that may result from the inability of its customers
to make required payments. That estimate is based on historical collection experience, current economic and market conditions,
and a review of the current status of each customer’s trade accounts receivable. If the financial condition of its customers were to
deteriorate or its judgment regarding their financial condition was to change negatively, additional allowances may be required
resulting in a charge to income in the period such determination was made. Conversely, if the financial condition of its customers
were to improve or its judgment regarding their financial condition was to change positively, a reduction in the allowances may be
required resulting in an increase in income in the period such determination was made.
December 31, 2010
(In millions) Asset (Liability)
Derivatives designated as effective hedges:
Cash flow hedges:
Interest rate swaps $ (5.3)
Foreign currency contracts (14.4)
Fair value hedges:
Interest rate swaps (10.2)
Cross-currency swaps (4.1)
Subtotal (34.0)
Derivatives not designated as effective hedges:
Foreign currency contracts (1.3)
Commodity contracts 0.9
Subtotal (0.4)
Total $ (34.4)
17